Ruble’s struggle isn’t over - April 16, 2018

Ruble is falling sharply against the US Dollar and the Euro again, as new sanctions are in place against Russia. In the last 10 years Ruble fell 60% and 52% against the USD and the Euro respectively. This also means that keeping savings in these currencies is still a good idea.

Western sanctions against Russia have been hurting the country’s economy for a while, but now, a new batch of them was announced as well as Russia announced taking steps to fight against the US sanctions. In response to the news about the sanctions, Ruble started to fall, and it didn’t stop until it hit a 16-month low. The Russian currency fell 7% against the USD in two days last week.

Ruble has a hard decade

The currency recovered a bit since its big fall, but Ruble’s future is still in question. Judging from its past, though, there is not too much to be optimistic about. It’s falling hard against the USD and the Euro in the last 10 years.

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As it can be seen from the chart above, the Ruble had some ups and downs, but altogether it still has a bad time. Against the Dollar it fell more than 60%. But this is not only about the relations between the USA and Russia. The Ruble also fell almost as much: it lost 52% of its value compared to the European Union’s currency.

What will the future bring?

We probably won’t see any turnaround for the Ruble soon. According to Bloomberg’s analysis, the “latest sanctions are notably worse than earlier ones over Ukraine because they specifically bar any trading of securities of targeted companies rather than just blocking access to new international funding”. These will hurt the economy, therefore the Ruble too.

In the meanwhile, rising Brent prices may help the oil (and in general, fossil fuel) dependent Russian economy. According to a Financial Times analysis, oil prices are closely connected to Ruble price, but now sanctions seem to cancel that effect out. FT also mentions that they believe that Russia may be stronger after its long recession.

Ruble from an investor’s point of view

Altogether, from an investor’s point of view it still seems to be better to keep savings in USD or EUR than in Ruble. In the last 10 years, if someone kept their savings in Ruble instead of Dollar or Euro they could have lost close to 60% of their saving’s value. Or to put it the other way around: keeping money in USD or EUR instead of Ruble made a serious profit in the last decade. This is true for keeping money as it is, in cash or in a bank account, but the same is true for investing.

It’s also important to acknowledge that the Ruble not only fell against the Dollar but the Euro as well. This means that investors have the chance to diversify their portfolios and not only focus on one Western currency but on at least two.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.